What Is a Business Credit Report?

by Melinda Hill Sineriz ; Updated September 26, 2018
Mature businessman with laptop in a hotel lounge.

More than 25 percent of businesses surveyed by the National Small Business Association were not able to receive the funding they needed. Funding is critical for starting or growing your business. One of the obstacles for many small business owners is having poor or limited business credit. According to another NSBA survey, 20 percent of small business loans were denied due to business credit.

It’s important to establish business credit. Many small business owners comingle their personal and business funds, but this can lead to complications at tax time and in the event of a lawsuit. A better course is to establish good business credit. To find out where you stand in terms of your business credit, you should obtain a business credit report.

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  • A business credit report shows the credit history of your business, including your payment history and whether you have any bankruptcies or accounts in collections.

What Is Business Credit?

Business credit, sometimes referred to as commercial credit, is credit that is associated with your company or business. To obtain business credit, your business needs to be registered and structured as a corporation or a limited liability company. As you begin to establish and use business credit, you will have a credit score and a credit report, just as you do with personal credit.

What is a good business credit score? Unlike personal credit scores, which range from 300 to 850, business credit scores are on a simple-to-understand 0 to 100 scale. The higher your number, the better your business credit score is. Just like in school, 100 is a perfect score.

There are three main business credit scoring and reporting companies: Dun & Bradstreet, Equifax and Experian. Each company uses its own specific criteria, so you may have different credit scores from different companies. For example, you could have a credit score of 76 with Dun & Bradstreet and a credit score of 80 with Experian.

Why Is Business Credit Important?

In addition to separating your business credit from your personal credit, business credit is also important because you can access significantly more funds with business credit. You can typically access 10 to 100 times more financing with business credit than you can with personal credit. This can turn a $10,000 personal loan into $100,000 in business financing.

If you establish business credit, you also have access to a wider range of funding options. There are hundreds of lenders that focus on businesses, and many of these offer low interest rates to those with good business credit. You can also establish trade credit, which allows you to establish credit lines with vendors and suppliers.

Business credit also increases the value of your company. Unlike personal credit, your business credit score is transferable. If you decide you sell your business, the credit you have established goes with your company. The new owner will benefit from the work you’ve done to establish good credit. Good business credit can boost your company’s sale price and make it an appealing option for buyers.

Your business credit history can also have an impact on your potential relationships with clients, vendors and suppliers. If you are thinking about working with a vendor, that vendor may check your business credit to decide whether to work with you or not. If you have a history of late or missing payments, you may not be able to establish the business relationships you need to succeed.

What Is a Business Credit Report?

A business credit report provides potential lenders with information on your business. It includes general information such as who owns your business, the number of employees you have and your revenue. It also includes your business’s financial information and your business credit score and risk factors. If your credit score is low, it will explain why your credit score is low. It also includes your payment history on your business account and whether your business has been subject to any collections, liens, bankruptcies or judgments.

How Is Your Business Credit Score Calculated?

Each of the business credit reporting agencies has its own scoring criteria. The business credit score doesn’t include any of your personal credit information. Dun & Bradstreet looks at your company’s risk based on a Paydex score. Your Paydex score is based on your payment history. To have a Paydex score, you need to file for a DUNS number with Dun & Bradstreet, which is free.

Equifax uses a payment index and also includes a credit risk score and a business failure score on its reports. The payment index tracks your on-time payment history with vendors and creditors. Your business credit risk score evaluates how likely your business is to fall behind on payments, and your business failure score measures how likely your business is to close in the next year.

Experian offers a CreditScore report. It takes multiple factors into account when looking at credit, including your payment history, the balances on your loans and whether you’ve had any legal filings.

How Do I Get a Copy of My Business Credit Report?

It’s good practice to get a copy of your business credit report from each of the three business credit reporting services at least once per year. You should review each of your reports for any errors or inaccuracies. If you find any, you should report those errors to the appropriate reporting agency in writing.

There is no option for obtaining a free official business credit report. You can purchase a credit report from each of the three business credit reporting bureaus, though. The cost of a copy of your credit report ranges from $40 to $100, and you can request a copy of your business credit report by visiting each agency’s website.

You can get a free credit report if you’ve been declined for credit by a lender. Your lender will send you a letter outlining why you were declined and who you should contact for a copy of your credit report.

How Do You Obtain Business Credit?

If you have a new business or if you’ve been commingling personal and business funds, you need to establish business credit. You can establish business credit by appropriately structuring and registering your company and applying for an employer identification number through the IRS.

The next step is to open a business checking account and a business credit card. Without an established business credit history, you may face some challenges in being approved for a business card. You may qualify for an unsecured business credit card with a low limit. Another option is to apply for a secured business credit card.

With a secured business credit card, you send the credit card company a security deposit. The credit card company issues you a credit card with a credit limit that is equal to or higher than your security deposit. You then use the secured card just like an unsecured card, making regular payments. If you miss payments or stop paying altogether, the credit card issuer will use your security deposit to pay off your credit card balance.

Once you have a business credit card, you should use your credit card to make purchases. Make sure to make regular payments and keep an eye on your credit utilization. You should aim to keep your credit utilization below 50 percent. If you have a $10,000 credit limit, you should keep your credit balance below $5,000. The ideal credit ratio across all your credit lines is 15 percent. This means that if you have a total of $100,000 of credit across all your credit lines, you should keep your balance below $15,000.

You should also establish lines of credit with suppliers and vendors. Ask the suppliers and vendors with whom you work to report your payment history to the credit reporting agencies. You should aim to establish credit with at least four to five vendors.

You should also set up a dedicated business phone number that’s listed in the name of your company. This helps to further establish your business identity.

Once you have a credit card and credit established with your vendors, pay them on time. If possible, pay them early. This helps establish that you are a good credit risk and opens the door to additional funding when you need it.

How Do You Protect Your Business Credit?

Another reason to regularly review your business credit report is to protect your business credit. Many people have been impacted by identity theft, and businesses can have their identity stolen as well. You should review your business credit report at least once per year, and the business credit reporting services also offer credit monitoring for a fee.

In addition to checking your business credit reports, you should also keep a close eye on your business account statements. Although it’s time consuming, you should review each one for any unauthorized activity. If you note any unauthorized activity, you should contact each of the business credit reporting agencies to put a freeze or a fraud alert on your account.

Can You Build Business Credit Without Personal Credit?

Your business credit and your personal credit are separate. This doesn’t mean that your personal credit won’t have an impact on your business credit options, though. For example, when you are applying for a business credit card, the credit card issuer may check your consumer credit report. Your personal credit isn’t the only factor they take into consideration, but it does have an impact.

If you have poor personal credit, you may need to establish a good business credit history by using secured business credit cards. This can show potential lenders that you take your business responsibilities seriously. You should also take steps to improve your personal credit, of course.

Some business loans also require you to personally guarantee a portion of the loan. In this situation, the lender may check your personal credit as well as your business credit.

How Can You Improve Your Business Credit Score?

If you have a lower business credit score than you would prefer, you can take steps to improve your business credit. If you’re not making your payments on time, you can improve your business credit score by establishing a pattern of on-time payments. Keep in mind that it might take your vendors some time to process your payment, so you should send in your payment at least a few days before the due date.

You should also lower your credit utilization. Ideally, your credit balance will be less than 15 percent of your total available credit. You can lower your credit utilization by paying down your balances or getting a credit limit increase. You can also see if you qualify for a new credit line, which increases your available credit and lowers your credit utilization percentage. If you haven’t established credit lines with your suppliers and vendors, ask them about starting one. If you have established credit lines that aren’t reflected on your business credit report, you can manually report that information to the business credit reporting agencies so you get recognition for your good payment history.

If you have any accounts in collections, make payment arrangements and ask for a “pay for delete.” This means that the collection agency will remove the negative information from your credit report. Not all agencies will do this, but it’s worth asking.

About the Author

Melinda Hill Sineriz is a freelance writer with over a decade of experience. She specializes in business, personal finance, and career content. She has worked in sales and has managed her own business for more than a decade. She has also written content for businesses in various industries, including restaurants, law firms, dental offices, and e-commerce companies. Learn more about her and her work at thatmelinda.com.

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